ENSafrica urges Alex residents to take steps to ease their debt burden

ENSafrica’s Banking and Finance Department’s candidate legal practitioner Gregory O`Connor writes:

Not so many people are familiar with what debt review is all about and when can one apply for the review, and if you are one of the many, ENSafrica has some advice for you.

In accordance with the National Credit Act 34 of 2005 (NCA), a consumer is over-indebted if he is unable to satisfy, in a timely manner, all his obligations under credit agreements to which he is a party.

To this end, a consumer may apply to a debt counsellor to have himself declared over-indebted. Upon a proper assessment of the application in line with the requirements of section 86 of the Act, a debt counsellor may declare that the consumer is:

• Not over-indebted and the application must be rejected;
• Not over-indebted, but is experiencing difficulty in satisfying their obligations under the credit agreements they are party to, and in which case the debt counsellor may recommend that the consumer and the relevant credit provider enter into a re-arrangement agreement; and
• Over-indebted and recommend that the Magistrate’s Court make an order that one or more of the consumer’s credit agreements be declared as reckless credit and/or that one or more of the consumer’s obligations be re-arranged.

Reckless credit agreements are agreements where a credit provider failed to conduct an adequate credit assessment of the consumer, or having conducted the assessment, nevertheless entered into a credit agreement with the consumer despite the consumer’s apprehension of their risks and obligations or possible over-indebtedness as a result of entering into that credit agreement. The Act strictly prohibits credit providers from entering into reckless credit agreements with consumers.

Where a court declares a credit agreement as reckless, it may order that:

a All or part of the consumer’s contractual obligations be set aside;

• The credit agreement be suspended; and
• Where the consumer is over-indebted, his obligations under any other credit agreement be restructured.

The effect of a debt review application is that the consumer does not become further indebted or is made unable to satisfy their obligations under any credit agreements.